With the recent surge in Sterling and Wilson’s (SWREL) order book (OB) and the promising prospects of India’s New Energy sector, we’ve conducted a scenario analysis, projecting a bull-case/ blue-sky value of Rs 760/1,635. We categorise orders as follows: (i) Core orders are approaching a peak historical level of Rs 7–8 billion, with Rs 6 billion in one year. (ii) Nigeria: There’s a potential long-term opportunity of $10 billion (a fivefold increase), with phase 1 ($1.5 billion) secured through a MoU. (iii) Reliance: Potential orders from parent company RIL could reach Rs 100 billion, possibly exceeding Rs 1 trillion over time. PBT is expected to turn around by the end of FY24 based on the current OB of Rs 6.2 billion. We are adjusting FY24/25E Ebitda downward by 5%/6% due to Nigeria delays, while maintaining the Rs 454 TP. Our valuation approach has shifted to a DCF model, reflecting the substantial long-term potential of SWREL, replacing the previous method based on EV/Ebitda.
Order inflow rising; synergies with RIL; Nigeria to be signed soon
SWREL has secured three significant domestic orders in FY24TD, totalling Rs 18 billion. The most recent order, valued at Rs 11 billion, involves 750MW of GIPCL. As of now, the current order backlog (OB) stands at Rs 62 billion, with all projects falling under the high-margin domestic Balance of System (BOS) category, yielding gross margins of 11–13%.
Nuvama research